George A. Vamvoukas

The twin deficits phenomenon: evidence from Greece

This paper explores the relationship between budget and trade deficits in a small open economy using annual data. The purpose of the paper is to test empirically the validity and rationale of the Keynesian proposition (conventional view) and the Ricardian equivalence hypothesis. The econometric methodology is based on cointegration analysis, error-correction modelling and Granger trivariate causality. The ECM empirical findings suggest that budget deficit has short- and long-run positive and significant causal effects on trade deficit.

Further evidence on the Export-Led Growth Hypothesis

The Export-Led Growth Hypothesis (ELGH) is an interesting subject of research in the field of applied economics. This paper investigates the causal links between exports and output growth in the empirical framework of the Greek economy, using error-correction modelling and multivariate Granger causality. A sensitivity analysis based on impulse responses is implemented to check the robustness of the results. The estimation procedure generates robust results, indicating that the ELGH is not valid in the case of Greece. Furthermore, the empirical findings suggest a strong and consistent causation from output growth to export performance in the long-run.

The relationship between budget deficits and money demand: evidence from a small economy

A considerable number of empirical studies exploring the links between budget deficits and the demand for money have led to mixed results. By using annual data of the Greek economy and previous empirical studies, this paper empirically evaluates the sensitivity and validity of the Keynesian proposition and the Ricardian equivalence hypothesis. The paper employs cointegration, ECM methodology, and several diagnostic and specification tests. The empirical findings show a significant and positive relationship between budget deficits and the demand for money, supporting the Keynesian model.

Panel data modelling and the tax-spend controversy in the euro zone

This article attempts to differentiate between the debatable tax and spend, spend and tax, fiscal synchronization and institutional separation hypotheses in order to explore empirically the interplay between public expenditures and public revenues in the Economic and Monetary Union (EMU) member states. For this purpose, panel data models are derived to test the validity of the four hypotheses in EMU countries. A notable characteristic of this article is that the four hypotheses are tested by dividing EMU countries into various subgroups and using disaggregated data for government expenditures and revenues. Seeking for the robustness of the empirical evidence, the panel data methods of Generalized Two-Stage Least Squares (GTSLS) and Generalized Method of Moments (GMM) are accordingly applied to identify the relationship between public outlays and taxation receipts. GTSLS and GMM results strongly support the fiscal synchronization hypothesis implying that budget decision-making is significantly influenced by both government expenditures and revenues components.

Do interest rates predict real economic activity

This paper employs a structural VAR procedure to test some fundamental propositions of the business cycle using a developing economy framework. The focus of the paper is on KBC, MBC and RBC theories as well as on the alternative view, which has been propagated mainly by Sims. The empirical analysis intends to report extensive evidence on the dynamics between money, output, interest rates and prices. The results suggest that the effects of system shocks conform to the alternative view supporting the central role of interest rates. Interest rate shocks explain a majority of the variation in money, output and prices. The results are generally robust across different orderings, alternative interest rate measures and various sample periods.